28674625 Foreign Exchange Regulation Act

8/6/2019 28674625 Foreign Exchange Regulation Act

1/13

Foreign Exchange Regulation


2/13

Introductiony The Foreign Exchange Management Act (1999) or in short FEMA has been introduced as

a replacement for earlier Foreign Exchange Regulation Act (FERA). FEMA came into acton the 1st day of June, 2000.

The main objective behind the Foreign Exchange Management Act (1999) is toconsolidate and amend the law relating to foreign exchange with objective of facilitatingexternal trade and payments and for promoting the orderly development andmaintenance of foreign exchange market in India.

FEMA is applicable to the all parts of India. The act is also applicable to all branches,offices and agencies outside India owned or controlled by a person who is resident ofIndia.

FEMA head-office also known as Enforcement Directorate is situated in New Delhi and

is headed by a Director. The Directorate is further divided into 5 zonal offices at Delhi,Bombay, Calcutta, Madras and Jalandhar and each office is headed by a Deputy Directors.Each zone is further divided into 7 sub-zonal offices headed by the Assistant Directorsand 5 field units headed by the Chief Enforcement Officers


3/13

Introduction to FERA

Foreign Exchange transaction were regulated in India by the

Foreign Exchange Regulation Act (FERA) 1973. this act also

sought to regulate certain aspects of the conduct of business

outside the country by Indian Companies and in India by

foreign companies.

The FERA was widely describes as a sever and objectionable

law. Following the economic liberalization ushered in 1991,

some amendment to the FERA were effected in 1993.


4/13

Objectives of FERA

The principle objective of the FERA act was to prevent the

excessive outflow of Indian Currency and to see that the

foreign exchange legitimately to India should be received

y

To regulate certain payments.y To regulate the dealings in foreign exchange and securities

y To regulate import and export of currency and bullion

y To regulate foreign companies

y To regulate acquisition, holding etc of immovable property inINDIA by non-residents


5/13

Provisions of FEMA


6/13

Dealing in Foreign Exchange etc

Section 3 of FEMA imposes restrictions on dealing in Foreignexchange and foreign security and payments to and receipts from anyperson outside India. Accordingly, excepts as provided in terms of theAct, or with the general or special permission of the RBI, no personshall

a. Deal in any foreign exchange or foreign security with any personother than an authorized person

b. Make any payment to or the credit of any person resident outsideIndia in any manner

c. Enter in to any financial transaction in India as a consideration for or

in association with acquisition or creation or transfer of right toacquire, any assets outside India by an person

d. Receive otherwise through an authorized person, any payment byorder or on behalf of any person resident outside India in any manner


7/13

Holding of Foreign exchange etc

y No person resident in India shall acquire, hold, own, possess

or transfer any foreign exchange, foreign security or any

immovable property situated outside India.


8/13

Current a/c transaction

y FEMA permits dealing in foreign exchange through

authorized persons for current a/c transactions. However,

the Central Govt can impose reasonable restrictions in public

interest.


9/13

Capital a/c transactions

y Any person my sell or draw foreign exchange to or from an

authorized person for a capital account transaction permitted

by the RBI in consultation with the central government. The

RBI in consultation with Central Govt specify any class or

classes of capital account transaction which are permissible

and limit up to which foreign exchange shall be allowable for

such transaction


10/13

Exports of Goods and Services

y Every exporter of goods shall-

Furnish to the Reserve bank or to such other authority a

declaration as specified, containing true and correct

material particulars, including the amount representing thefull export value.


11/13

Realization and Repatriation of Foreign

Exchange

Where any amount of foreign exchange is due or has accrued to

any person, he shall take all reasonable steps to realize and

repatriate It to Indian with in the time and in the manner

prescribed by the RBI. Several exemption are, however,

granted to this clause.


12/13

Contravention and Penalties

Penalty for any kind of contravention under this act is liable to a

penalty up to thrice the amount involved where it is

quantifiable or up to Rs. 2lacs where it is not quantifiable,

further penalty which may extend to five thousand for every

day the first day during which the contravention continues


13/13

Difference b/w FERA & FEMAFERA

y FERA cosisted of 81 sections and

was more complex

y Terms like Capital a/c transaction

and Current a/c were not defined

in FERA

y Definition of Authorized Person in

FERA was narrow one.

y Anything and everything that has to

do with foreign exchange was

controlled

y Its aim was to prevent misuse

y Its main objective was conservation

and proper utilization of the foreign

exchange resources

y FEMA

y FEMA is much simple, and cosists

of only 49 sections

y Terms like Capital a/c transaction

and Current a/c transaction have

been defined in detail in FEMA

y The definition of Authorized

Person has been widened to

include banks, money exchanges,

off shore banking units etc

y Only the specified acts relating to

foreign exchange are regulated

y It aims to facilitate trade

y Its main objective is to facilitate

trade & develop foreign exchange

mkt.

Documents

28674625 Foreign Exchange Regulation Act